Growth prospects in rest of 2021 under the microscope

August 19, 2021 | 11:53
Many sectors with impressive second-quarter performance are expected to retain their growth momentum in the latter part of 2021, leveraging favourable supportive factors.
Growth prospects in rest of 2021 under the microscope
The COVID-19 pandemic has benefited several industries

Accordingly, Vietnam had witnessed 24 per cent growth in export-import value on-year in the first quarter and a 39 per cent jump in the second quarter, even surpassing pre-pandemic levels. This is, however, not unique to Vietnam but is reported across the entire Asia region.

Generally in the first six months of 2021, Vietnam posted an estimated $157.6 billion in total export value, up 28.4 per cent on-year. During the period, the US was Vietnam’s largest export market with $45.1 billion, a 43.3 per cent jump on-year, while exports to the EU amounted to $19.3 billion, up 17.4 per cent.

A rebound in consumer demand in Vietnam’s top export markets like the US and the EU has benefited export-oriented sectors like seaport and logistics.

Le Nguyen Nhat Chuyen, analyst at Korean-backed Maybank Kim Eng Securities, said that the COVID-19 pandemic has caused serious disruptions in logistic services, leaving seaports overloaded.

Social distancing has caused a shortage of manpower and slowed down goods circulation. Many countries have imported more than they exported, leading to an imbalance in container supply, pushing logistics costs to new heights.

Shipping disruptions abounded in 2021 due to the COVID-19 pandemic and the staggered reopening of markets across the globe, holding up shipping firms.

The COVID-19 situation, however, is intensifying in Vietnam, forcing many factories to operate at reduced capacity while facing labour shortages, making timely delivery difficult.

Meanwhile, in the fertiliser sector, domestic prices were affected by the price of imported fertiliser which went up sharply on the back of soaring logistics (shipping) costs.

Self-reliant fertiliser businesses like PetroVietnam Fertiliser and Chemicals Corporation (DPM) and PetroVietnam Ca Mau Fertiliser JSC (DCM) will be able to maintain high-profit growth in successive quarters.

At the same time, leveraging a rebound in consumer demand, many textile, clothing, and fibre firms reported upbeat profits thanks to increasing order intake and prices in the first half. Leading players have received export orders for the whole of 2021 from the US, Japan, EU, or South Korean markets.

In addition, thanks to Vietnam’s reputation gained from containing the previous resurgence of the COVID-19 pandemic, a raft of global fashion brands have shifted production to Vietnam when the pandemic was taking a toll in big apparel exporting countries like India and Bangladesh.

The COVID-19 situation, however, is intensifying in Vietnam, forcing many factories to operate at reduced capacity while facing labour shortages, making timely delivery difficult.

The Vietnam Textile and Apparel Association (Vitas) assumed that businesses in virus-hit localities could lose export orders. Pressure would abate with the acceleration of the government’s COVID-19 vaccination programme, from there containing the pandemic and enabling firms to rebound operations.

The seafood sector is another beneficiary, with leading players like Vinh Hoan Corporation (VHC) or Sao Mai Group (ASM) posting double-digit growth in their revenue in H1. The cost burden, particularly logistics cost, however, has put a dent in the firms’ profits, leading to only modest growth.

According to the Vietnam Industry and Trade Information Centreunder the Ministry of Industry and Trade, Vietnam’s big export markets like the US, UK, Japan, the EU, Canada, and China gradually overcoming COVID-19 through extensive vaccination would lead to a sharp rise in seafood import demand.

Vinh Hoan Corporation, the largest pangasius exporter in Vietnam, reported that its exports to the US rose 31 per cent on-year in July as restaurants reopened in the market resumed operation. Accordingly, the company posted VND765 billion ($33.2 million) in revenue in July, a 21 per cent jump on-year.

Wood production is also looking at upbeat growth potential. According to the General Department of Customs, the value of Vietnam’s wood and wood product exports soared 55 per cent on-year reaching $9.58 billion in the first seven months, with the export of wooden items coming to $7.44 billion, a 64 per cent jump.

By early July 2021, Duc Thanh Wood Processing JSC (GDT), a leading player based in Ho Chi Minh City, has received export orders of more than $14.5 million, taking up 86 per cent of the order intake for 2021.The company has raised the price of their products from Q2 to mitigate rising input cost.

Similarly, residential real estate is showing solid growth potential in the medium and long-term, powered by accelerated public disbursement for infrastructure projects.

However, residential real estate projects finalise profit after product handover. Accordingly, businesses with effective sale activities and those that can maintain construction progress are expected to report positive results.

Meanwhile, the building materials sector, particularly steel, will also benefit from public investment. Experts at SSI Securities assumed that accelerated public investment will drive up steel demands.

By Hang Thuy

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